Have a series of questions from Chapter 26 of Horgreens Accounting the managerial chapters. I have attached the questions in an excel file. Thanks
E23-16 Stenback Pro Company managers received the following incomplete performance report: Complete the performance report. Identify the employee group that may deserve praise and the group that may be subject to criticism. Give your reasoning. Units Sales Revenue Variable Expense Contribution Margin Fixed Expenses Operating Income Stenback Pro Company Flexible Budget Performance Report Year Ended July 31, 2014 Flexinble Sales Actual Budget Flexible Volume Results Variance Budget Variance 39,000 0 39,000 3,000 F 218,000 0 218,000 27,000 F 84,000 3,000 U 81,000 10,000 U 134,000 3,000 U 137,000 17,000 F 108,000 7,000 U 101,000 0 26,000 10,000 U 36,000 17,000 F Static Budget 36,000 191,000 71,000 120,000 101,000 19,000 A few different departments deserve some praise. Sales have increased and management should direct any praise towards the sales team. A con would be the increase in variable cost which could be do to a need for more labor and better negotiation of product material cost. Fixed cost have also increased and management should be concerned about the reason for the increase. E26-19 Using payback to make capital investment decisions Robinson Hardware is adding a new product line that will require an investment of $1,454,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $300,000 the first year, $270,000 the second year, and $260,000 each year thereafter for eight years. Compute the payback period. 5.4 yrs E26-20 Using ARR to make capital investments decisions Refer to the Robinson Hardware information in Exercise E26-19. Assume the project has no residual value. Compute the ARR for the investment. Round to two places. 16.45% E26-21 Using the time value of money 2. $124,656 Janice wants to take the next five years off work to travel around the world. She estimates her annual cash needs at $28,000 (if she needs more, she will work odd jobs). Janice believes she can invest her savings at 8% until she depletes her funds. 1. How much money does Janice need now to fund her travels? 2. After speaking with a number of banks, Janice learns she will only be able to invest her funds at 4%. How much does she need now to fund her travels? E26-24 Using NPV and profitability index to make capital investment decisions Use the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $260,000 and offers seven annual net cash inflows of $57,000. Kyler Products requires an annual return of 16% on investments of this nature. Project B: Costs $375,000 and offers 10 annual net cash inflows of $75,000. Kyler Products demands an annual return of 14% on investments of this nature. Requirements 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. 2. What is the maximum acceptable price to pay for each project? 3. What is the profitability index of each project? Round to two decimal places. 1. Project B $16,200 NPV E26-25 Using IRR to make capital investment decisions Refer to the data regarding Kyler Products in Exercise E26-24. Compute the IRR of each project and use this information to identify the better investment. Project A 12% - 14% IRR P26-38 Using payback, ARR, NPV, and IRR to make capital investment decisions This problem continues the Davis Consulting, Inc. situation from Problem P25-34 of Chapter 25. Davis Consulting is considering purchasing two different types of servers. Server A will generate net cash inflows of $25,000 per year and have a zero residual value. Server A's estimated useful life is three years and it costs $40,000. Server B will generate net cash inflows of $25,000 in year 1, $11,000 in year 2, and $4,000 in year 3. Server B has a $4,000 residual value and an estimated life of three years. Server B also costs $40,000. Davis's required rate of return is 14%. Requirements 1. Calculate payback, accounting rate of return, net present value, and internal rate of return for both server investments. Use Microsoft Excel to calculate NPV and IRR. 2. Assuming capital rationing applies, which server should Davis invest in
